The Union Cabinet has now cleared another ambitious Rs 80 billion debt- recast and reform package to revive state utilities called Ujwal Discom Assurance Yojna ( UDAY). The scheme aims for a financial turnaround of discoms by reducing their interest cost,
ers as well as state generators were feeling the heat due to low demand, resulting in lower capacity utilisation.
Now there is a ray of hope for discoms. The central government’s effort to improve the financial health of power distribution companies has once again taken shape, with the unveiling of a revival package. The Union Cabinet has now cleared another ambitious Rs 80 billion debt-recast and reform package to revive state utilities called Ujwal Discom Assurance Yojna (UDAY). The scheme aims for a financial turnaround of discoms by reducing their interest cost, improving operational efficiencies, reduction of cost of power and enforcing financial discipline through state finances. This is one of the most significant reforms undertaken by the central government to fix the finances of some of the most stressed discoms and create an enabling environment for a quick turnaround.
This will allow states to take over in a graded manner the debt of discoms, helping reduce their interest burden and allowing them to buy power to ensure uninterrupted supply. States have been given strong incentives such as cheaper power and more coal if they adopt the scheme. The state will have to take 75% of the outstanding debt of ailing distribution companies as on 30 September 2015. 50% of the debt is to be taken in the current fiscal year i.e. FY 16 and 25% in FY 17. In these two years, this debt will not be added in calculating state fiscal deficit. States will issue State Development bonds in the market or directly to the respective banks or financial Institutions holding the discom debt.
State-run Power Finance Corporation and Rural Electrification Corporation, which have large exposure to the discoms, will not be forced to buy the